Palamon acquires feelunique.com

Pan-European growth investor Palamon Capital Partners has bought a majority stake in feelunique.com, a beauty e-commerce specialist, in a deal valued at £26 million ($41.97 million; €32.18 million). Sirius Equity, a private equity firm focused on the luxury goods and retail sectors, will invest alongside the firm in the transaction.

Feelunique is a Jersey-based online retailer distributing haircare, skincare, cosmetics and fragrances from major brands including Dior, Lancôme, Clarins, Guerlain, and Yves Saint Laurent. Created in 2005, the company has managed to stand out thanks to the editorial content of its website, which is directed by beauty journalist and Harper’s Bazaar director-at-large Newby Hands.

It has also gained an edge through a progressive expansion of its offering and the development of customer loyalty programs. The company has grown more than 40 percent per year since inception. Counting 125 employees, it now sells an annual £30 million worth of beauty products.

Palamon envisions handsome potential rewards in its latest acquisition. “Feelunique is ideally placed to benefit from the fast expanding on-line retail beauty sector with its established platform, a strong business model and entrepreneurial management team,” said Dan Mytnik, Partner at Palamon, in a statement. The firm will take over majority owbership from feelunique’s founders and seed investors, with a view to bring the company to its next stage of growth.

The transaction is further sign of the growing interest of private equity firms for e-commerce platforms, a sector they see as largely immune to macroeconomic woes, as well as favourably placed to ride over a consumer shift away from physical stores. Similar deals in recent years have included UK-based M and M Direct backed by TA Associates, Italy-based Yoox backed by Benchmark Capital and Soros-backed US-based Bluefly, Germany’s Private Sale backed by Mangrove Capital, and Swiss-based eBoutic.ch backed by Alven Capital.

Palamon itself is not new to the sector. The firm bought a majority stake in German retailer Dress-for-Less in 2007, which it exited last year on a trade sale that generated a 40 percent IRR.

Feelunique is an acquisition from Palamon's Fund II. No debt was used to finance the transaction, Dan Mitnyk, partner at Palamon, told Private Equity International.

The deal comes in the wake of a few structural changes for the firm. John David, ex-Allstate Investments, was appointed as the firm’s new managing director in November, and ex-Coller Capital Michael Beetz joined the executive team as Associate Principal in July.

Such changes have not prevented Palamon from scoring successes in recent months, as illustrated by the sale of Expresso House to Herkules Capital, the exit from DS Produkte in a management buyout, and the £47.3 million refinancing at portfolio company Towry Group earlier this year. The firm netted a 3.4x return on its Expresso House exit, which buoyed its 6 year-old Fund II to a 2.6x overall return.